When the State argues that you can’t sue it because it enjoys sovereign immunity, is it saying that the court does not have subject matter jurisdiction over claims against a sovereign body (a 12(b)(1) argument), that the court does not have jurisdiction over the person of the State because the State is a sovereign (a 12(b)(2) argument), or that you cannot state a claim against a sovereign in the first place (a 12(b)(6) argument)?
Because of a quirk in North Carolina law, this distinction appears to make a big difference in the world of interlocutory appeals. In Can Am South, LLC v. North Carolina, the State was sued by its landlord for allegedly breaching certain leases. The landlord sued the State, which then moved to dismiss on the basis of sovereign immunity under Rules 12(b)(1) and (2), but not (6). The trial court denied the motion because sovereign immunity generally does not protect the State when it enters into contracts. The State filed an immediate, interlocutory appeal from the order.
Relying on prior case law, the Court of Appeals dismissed the State’s appeal of the order to the extent its sovereign immunity defense was based on Rule 12(b)(1) (subject matter jurisdiction) but allowed the appeal of the order to the extent it was based on Rule 12(b)(2) (personal jurisdiction). The Court noted that it would also have allowed the immediate appeal had the State couched its sovereign immunity defense as a Rule 12(b)(6) motion (failure to state a claim), because of the “longstanding rule that the denial of such a motion affects a substantial right” under N.C. Gen. Stat. § 1-277(a).
In this particular appeal, the “split verdict” on the propriety of the interlocutory appeal had no practical effect, since the State had raised a 12(b)(2) defense in the alternative. But the legal framework cited in this case appears to lay a trap for the State for future cases—cite “the wrong b” in a motion to dismiss, and a denial of your sovereign immunity defense no longer affects a substantial right.
This rule elevates form over substance in a way that I think is particularly unhelpful and apt to create unnecessary confusion.
An order denying a motion to dismiss under Rule 12(b)(2) is immediately appealable by statute. N.C. Gen. Stat. § 1-277(b). Any other interlocutory order denying a motion to dismiss is also immediately appealable if the appellant can show that the order affects a substantial right that will be lost absent immediate appellate review. Id. § 1-277(a). Because the defense of sovereign immunity is predicated on the right not to be haled into court in the first place, it would seem that a motion to dismiss based on sovereign immunity, however denominated, would “affect a substantial right” and be immediately appealable under § 1-277(a).
Indeed, this has been the law since at least 1992. See EEE-ZZZ Lay Drain Co. v. N. Carolina Dep’t of Human Res., 108 N.C. App. 24, 27, 422 S.E.2d 338, 340 (1992) overruled on other grounds by Meyer v. Walls, 347 N.C. 97, 489 S.E.2d 880 (1997) (“However, recent case law clearly establishes that if immunity is raised as a basis in the motion for summary adjudication, a substantial right is affected and the denial is immediately appealable. Here the defendants assert immunity as a defense; the appeal from the denial of their motions is therefore properly before this Court.” (citations omitted)); see also Richmond County Bd. of Educ. v. Cowell, 739 S.E.2d 566, 568 (N.C. Ct. App. 2013) (“This Court has consistently held that the denial of a motion to dismiss based upon the defense of sovereign immunity affects a substantial right and is thus immediately appealable.” (quotations omitted)).
The Court of Appeals has continued to recognize this common sense ruling consistently in the context of Rule 12(b)(6) motions. See, e.g., Meherrin Indian Tribe v. Lewis, 197 N.C. App. 380, 385, 677 S.E.2d 203, 207 (2009). In the context of Rule 12(b)(1) motions, however, the Court of Appeals appears to have come down on both sides of the issue. Compare Richmond County, 739 S.E.2d at 568 (allowing immediate appeal of order denying motion to dismiss based on Rules 12(b)(1), (2), and (6) without parsing the bases) with Can Am South (analyzing the immediate appealability of each cited basis for the motion to dismiss separately and rejecting the immediate appeal of the Rule 12(b)(1) defense).
The Can Am South line of cases seems to be in tension with the Supreme Court of North Carolina’s pronouncement that the doctrine of sovereign immunity may be considered a defense based on lack of personal jurisdiction, or, on the other hand, “may be characterized as an objection that the State courts have no jurisdiction to hear the particular subject matter of [the] claims against the State.” Teachy v. Coble Dairies, Inc., 306 N.C. 324, 327-28, 293 S.E.2d 182, 184 (1982). The Teachy Court pointed out that the distinction between the two characterizations may make a difference in the context of interlocutory appeals, since there is an express statutory basis to appeal orders relating to personal jurisdiction (§ 1-277(b)) but no corresponding statutory basis to appeal orders relating to subject matter jurisdiction. The Teachy Court did not say, however, that a motion to dismiss on sovereign immunity grounds filed under Rule 12(b)(1) would not affect a substantial right under § 1-277(a). Indeed, the Teachy Court did not address § 1-277(a) at all.
Since Teachy, the Court of Appeals has not only decided that the defense of sovereign immunity fits better into the Rule 12(b)(2) box, but has held that an order denying a motion to dismiss on sovereign immunity grounds submitted under Rule 12(b)(1) is not immediately appealable. See Data Gen. Corp. v. Cnty. of Durham, 143 N.C. App. 97, 100, 545 S.E.2d 243, 246 (2001) (“[T]he denial of a motion to dismiss pursuant to Rule 12(b)(1) for lack of subject matter jurisdiction is not immediately appealable”). The Data General holding cites Teachy for that proposition, but Teachy does not support it. Subsequent cases have cited Data General for the same proposition, which has now worked its way into several Court of Appeals opinions, which of course now bind subsequent panels.
The simplest rule would be this: it does not matter whether the State cites Rule 12(b)(1), (b)(2), (b)(6), or a mix-and-match combination of those bases for its motion to dismiss based on sovereign immunity. Provided the State pleads sovereign immunity as the basis for its dispositive motion, the trial court should look to the merits of the motion and not the numerical citation. If the trial court denies the motion and the State takes an interlocutory appeal, claiming that the order affects a substantial right, the appellate court should review the appeal on its merits. But, at least for now, that is not the law.